Maximising The Value of Your Business For Sale

Why maximising the value of your business is important:

When creating a business, the end goal will always be in your mind. For most people this end goal is either the sale of your business or passing it on so you can relax and enjoy all of the years of hard work that have been invested into it. There are many different contributing factors to whether a business is more or less attractive to potential buyers and at the end of the day, a more attractive business is going to result in a higher offer.

Maximising the value of your business allows you to strengthen your negotiating position when you are looking to sell and although this may seem like something that will happen long in the future, transition planning can be an extremely long process and take multiple years which means it has to be considered long before you decide you would like to part with your business. 

Scalability:

The first major area to think about when looking at maximising the value of your business is its scalability. When someone is looking at buying a business most of the time they are doing so with the vision of growing the business so that they can get the best return on their investment possible. The scalability of a business is referring to the level of growth potential that your business has and the more growth potential that buyers can see the more they will be willing to pay.

Diversification and Dependability:

Diversification can apply across a multitude of areas within your business including products, services and customers. Having diversity within your business helps to decrease the dependency that you have on one product or consumer group as sole dependability on one of these groups increases the risks within your business. This is because the business environment is ever changing and adapting and if a product for example suddenly falls out of fashion with your consumers, then you will be left with no way of keeping cashflow constant throughout the business. On the other hand if you have a varied product range all to different consumer groups then a potential buyer will see this as a much safer investment because if one product does fail then there are still good revenue sources available, thus reducing risk. 

Another area that is vital when looking to maximise your business is the diversification of your suppliers. Not only does diversification of suppliers lower the risk or effect of supply chain issues on your business but it also gives your business the upper hand when it comes to pricing and provides solid leverage.

Finally, it is also worth noting that diversification and dependability also go hand in hand with scalability as well!

Strong Management:

A strong and committed management team can be one of the most attractive aspects of a business to potential buyers allowing you to add value by making sure you have the right people on board. A strong management team will allow the business to separate itself from the owner helping it to carry out its day-to-day operations with no reduction in productivity or profitability throughout any stage of the sale. From the point of view of many buyers this can be a deal breaker because it will also indicate that less time consuming and costly work will have to be undertaken post sale, significantly reducing the perceived risk of purchasing the business. 

Documentation:

The key to any quick business sale is transparency, a buyer doesn’t want to waste their time trying to sort through all of your ill prepared and poorly filed documentation to find out whether your business is worth them buying or not, it should be clear for them from the start.

With this being said, the organisation of your documentation is also a great way of getting straight to the point and cutting out all of the waffle that the buyer does not want to see and more importantly highlighting the great selling points that will make your business sell for more. Making sure all of your documentation is in order can be one of the most time-consuming parts of the sales process but without it, it is very unlikely that the sale of your business will progress. 

Operations:

Much like the benefits of having a strong management team and committed staff that will ease the turbulence behind the transition from one owner to another, a new business owner does not want to have to come into the business and have to rework or renew all of the operations behind it. For example, building and equipment leases or contracts that you have with suppliers are generally expected to be a constant until after the business has fully transitioned and should not be expiring soon after the sale.

If overlooked, aspects of operations can have major knock-on effects to the new business owner, for example, if the lease on the business offices has to be renewed and a change in location is required then every employee that works there then has to be taken into account and how this move may affect them, or worst case scenario, force them to take a new job that will be better for them logistically.

These are all big picture thoughts that have very real-world consequences that can sometimes get lost in the complexities of a business sale.

Intellectual property:

Finally, an aspect to sale that not many people think in-depth about is the intellectual property behind their business and how much it is actually worth. Sometimes the worth of intellectual property can become diluted in the final sale price of your business and at this point you have to decide if it is worth selling such things separately or on the other hand, if it can add value to your business.

Summary: 

The sale process can be long and arduous so planning and preparation are key to a smooth and successful sale. Ask yourself the question at every stage, would ii buy this business without knowing the detail? The challenge is we take lots for granted when we are so close to our business. The things we inherently know, the things we've just automatically done, our knowledge of the business that has become second nature to us. Getting an outside perspective will always be beneficial so ensure you get someone else to help you plan and prepare well in advance to ensure its as smooth a process as possible.